Gold Price, Platinum Slide, Outlook Remains Bright

GOLD PRICE NEWS – The gold price fell back under $1,700 per ounce Wednesday.  At $1,691, the price of gold has fallen over $100 from its November 7 closing price of $1,795.  Weakness in global stock and commodity markets has weighed on gold as a wave of deleveraging has hit asset prices across the board.  S&P 500 stock futures fell 10.30 to 1172.50 this morning while cyclically-sensitive copper and platinum prices dipped 2.7% and 1.1% to $3.25 per pound and $1,554 per ounce, respectively.

Yesterday the gold price rebounded from Monday’s $47 plunge, advancing 1.3%, to $1,699.57 per ounce.  The price of gold climbed after a disappointing revision to third quarter U.S. GDP, and held firm following the release of the latest Fed minutes.   Silver jumped alongside the gold price, spiking 3.6% to $32.74 per ounce.  The considerable gains in gold and silver prices came despite a tepid move in the U.S. dollar, which fell just 0.1% against a basket of the world’s leading currencies.  Silver fell over 3% early Wednesday to $31.63 per ounce

Gold equities were lifted by the gold price rally, as the AMEX Gold Bugs Index (HUI) climbed 1.6% to 551.66.  Two of the HUI’s top performers on Tuesday were Yamana Gold (AUY) and Kinross Gold (KGC), which surged 2.1% and 5.7%, respectively.  Precious metals shares were one of the only sectors of the U.S. equity markets to finish in positive territory.  The S&P 500 Index declined 0.4% to 1,188.04, its lowest closing level in over six weeks.

The gold price has now retreated 12% from its $1,921 all-time high reached in September.  Despite the recent correction, the price of gold remains well above that of platinum – currently at $1,570 per ounce – a particularly rare occurrence which stems from the elevated economic concerns across Europe and the U.S.  The Global Precious Minerals team at TD Securities noted that the platinum/gold price ratio has rarely fallen below the 1.0 level over the past 25 years.  The firm contended that platinum has “participated in the rout for industrial metals…It feels like the market is fully discounting the precious metal attributes.”

While investors can purchase shares in numerous publicly-traded companies to gain exposure to the gold price, only a small collection of platinum-focused companies have publicly-traded equities.  One such company, however, is Platinum Group Metals (PTM.TSX, AMEX; PLG), which controls a large land package on one of the world’s most prolific platinum-producing belts.  Since October 2008, shares of PLG have climbed 89%, providing investors with considerable platinum price leverage over the last three years.

Yesterday evening, Platinum Group Metals released results for the fiscal year ended August 31, 2011.  Highlights from the past year included the company raising C$136 million in net proceeds to help fund the development of its key projects.  Since that time, Platinum Group Metals has made significant progress at its Western Bushveld Joint Venture (WBJV) Project 1 Platinum Mine, located in South Africa.  In March 2011, the Company received a positive record of decision from the Department of Mineral Resources of the Government of South Africa for the detailed underground development plans and environmental management program, including the taking of a bulk sample at Project 1.

Platinum Group Metals concluded its fiscal year in August by entering into a mandate letter with a consortium of financial institutions – including Barclays Capital and the Standard Bank of South Africa Limited – for a $260 million project finance loan to enhance the development of Project 1.  The WBJV Project 1 is advancing towards a 275,000 ounce per year platinum, palladium, rhodium and gold planned production profile.  Full commercial construction is budgeted at $443 million and initial commercial production is expected by late 2013.

The emerging platinum Company also recently made two key additions to its senior management team.  Mr. Mlibo Mgudlwa was appointed to the role of Vice-President of Platinum Group Metals (RSA) (Pty) Ltd., while Mr. Kris Begic to the position of Vice-President of Corporate Development of Platinum Group Metals Ltd.

R. Michael Jones, Platinum Group Metals’ President and CEO, commented that “The appointments of Mlibo and Kris to Vice Presidents of our operating and parent companies respectively is a result of their dedication and value add over many years and their growing roles as we expand our business.”

Moving forward, macroeconomic factors such as the European sovereign debt crisis and the potential for a renewed recession in the U.S. are likely to substantially influence the outlook for platinum relative to the gold price. As evident by today’s Fed minutes, the U.S. central bank has seriously considered additional accommodative monetary policies and stands ready to implement them should the economic outlook deteriorate.  If the Federal Reserve chooses to reignite the printing presses, the prices of both platinum and gold could be prime beneficiaries.